The machinery and equipment sector strengthened despite the ongoing exit of car manufacturers.

Ai Group chief executive Innes Willox says the momentum in the manufacturing sector is good news for workers and the economy.

"With new orders also growing strongly, the immediate outlook is for further and very welcome expansions in the manufacturing sector," Mr Willox said in a statement on Monday.

But, Mr Willox said, the Australian manufacturing sector still had a considerable way to go before reaching its full potential, with uncertainties over energy affordability, security and sustainability needing to be addressed urgently.